In 2022, only about 21% of Americans feel comfortable investing in cryptocurrency, according to Bankrate’s September survey. That’s down from 35% in 2021.
Although comfort levels dropped with investors across generational lines, the decrease was steepest among millennials. Nearly 30% of American investors between the ages of 26 and 41 feel comfortable in 2022, compared to nearly 50% in 2021.
The decline is unsurprising, considering nearly $2 trillion has been wiped off the entire crypto market since November 2021.
“Traders of any asset are fair-weather fans, and with major cryptocurrencies such as Bitcoin and Ethereum down more than 70% from their all-time highs, it’s little wonder that the shine has come off these coins,” James Royal, principal reporter at Bankrate, tells CNBC Make It.
“Declining crypto prices don’t help the cause of attracting more people to crypto,” he adds.
Initially, many young investors’ interest in crypto was due to the “lottery-ticket atmosphere” where it appeared you could make a lot of money quickly, Royal says: “Many young investors don’t understand what they’re buying but they can see the price going up, and so they want in.”
However, the price of popular digital currencies such as bitcoin have struggled to reach their 2021 highs. Bitcoin has been trading between $18,000 and $25,000 since June down from its record highs of over $65,000 in November 2021.
“The only way you can make money on it is by selling it on to someone who’s more optimistic or foolish than you are,” Royal says. For this reason, he adds, crypto shouldn’t be considered a traditional investment.
“It’s more like you’re buying an arcade token and hoping someone will pay you more for it later on. It’s for this reason that legendary investors such as Warren Buffett won’t have anything to do with cryptocurrency,” he says.
Cryptocurrency is considered to be a highly volatile asset that is subject to unpredictable fluctuations in price. Financial experts typically advise against investing more money into cryptocurrency than you’re willing to potentially lose, since there’s no guarantee of earning a profit.
If you’re in search of a less speculative investment, you have plenty of tried-and-true options: “Buying an S&P 500 index fund regularly and then holding on through thick and thin has built the fortunes of many American millionaires,” Royal says.
“Sure, some people win the lottery, but wealth is built over time and it’s attainable for those who can be disciplined investors,” he adds.